Stormy Daniels, North Korea and malicious Russians all belong on the back burner. The big political game to watch, because it moves the odds at this year’s national elections and affects your wallet, is still the Tax Cuts and Jobs Act that Republicans passed in December.
Republicans and Democrats and their surrogate groups mounted marketing campaigns to sell voters on either the Republican case that the big tax overhaul is a bonanza for them or the Democrats’ notion that in the long run it screws them.
No one doubts who the primary beneficiaries are — corporations and other business owners. But one corporation after another came forward, with White House acclaim, to announce that they were going to spread some of the big tax savings to workers in the form of bonuses, wage increases or new hires. Grover Norquist’s Americans for Tax Reform put out a list of 400 companies that were giving workers a raise or a bonus. Democrats countered with companies that were using their new profits on stock buybacks, dividend hikes and executive bonuses.
Morgan Stanley analysts weighed in with an estimate that corporations would spend 43 percent of their tax savings directly on investors in the form of stock buybacks and higher dividends and only 13 percent on employees, including corporate executives, whose compensation is often tied to stock prices, which rise with buybacks.
A downside of the new tax law — your growing chunk of national debt — is reserved for the smaller type on the financial pages. The first of this week the Treasury Department auctioned another $34 billion of fresh debt to cover government expenses after revenues plummeted and Congress lifted debt and spending limits. It will be a regular and growing phenomenon.
Polls show that Republicans are winning the political stakes, as they always do — remember the PR war after the passage of the Affordable Care Act in 2010, won decisively by the GOP.
Arkansas had its share of happy news. Walmart announced that, thanks to the tax law, it was raising its lowest starting wage and giving one-time bonuses starting at $250 to employees who have been there longer than two years. Spoilers pointed out that the company gave similar benefits at the end of 2015 and 2016. Walmart also announced it was cutting 1,000 jobs and closing 63 Sam’s Club Stores.
But there was some unalloyed good news. Electricity and gas consumers in Arkansas will see their monthly bills lowered before the fall elections. Investor-owned utilities, all monopolies, typically are allowed to earn a state-fixed rate of return on investments, so most of their new tax savings will have to be returned to the ratepayers.
Governor Hutchinson, a loyal Republican, saw the political opportunity and asked his Public Service Commission to start rate proceedings to immediately divert the utilities’ savings to ratepayers. Entergy Arkansas, the big electric utility, filed a tariff that will go into effect April 1. For the average homeowner, the rate cut will be between $40 and $45 a month over the year’s remaining nine months.
Wait, scrub that $45. The fine details of Entergy’s tariff call for it to spread the year’s savings for residential customers over 21 months, not nine months, so it will be more like $20.35 a month. Entergy’s explanation for keeping people’s money another year is that it will protect homeowners from the “rate shock” that would occur if their bills went back up from over $40 on Jan. 1, 2019. It won’t shock as much if it goes up from $20.35 in 2020. Residential customers, of course, can handle the shock as easily as industrial and commercial users and deserve to get their money when it is due, just as the biggies will.
The tax law’s marketing has another hitch. Like every major law devised in secret and haste, it is full of errors and miscalculations that need to be fixed by law. Businesses that did not have a lobbyist in the huddle when the bill was drafted are discovering that the fine print or drafting errors puts them at a competitive disadvantage or without the full benefits they expected. But in the current political climate, fixing the law might be impossible. The Affordable Care Act had to be enacted and preserved in spite of its known flaws because Republicans had the votes to prevent any fixes. Since they were not allowed to fix Obamacare or have any role in drawing up the tax law, Democrats may force Republicans to live with what they did.
Stephen Steed in the Arkansas Democrat-Gazette reported that the law may put commercial grain dealers in Arkansas and other states out of business because it allows farmers to deduct 20 percent of their sales to farmer-owned cooperatives, but no such deduction is allowed for sales to commercial grain houses. What farmer will sell to a grain dealer if he can get his taxes erased by selling to a coop?
Who cares? Republicans may not be dynamite at lawmaking, but they will prove again that they are unsurpassed at marketing.